VEL
Velocity Financial, Inc.
$18.01
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 62.8% below fair value
You pay
$18.01
Bear
$32.29
Fair
$48.39
Bull
$58.05
Bear
$32.29
+79.3%
ROTCE 12.1% → 1.94x TBV
Fair
$48.39
+168.7%
ROTCE 16.1% → 2.91x TBV
Bull
$58.05
+222.3%
ROTCE 18.5% → 3.49x TBV
Adjust Assumptions
16.1%
8.2%
Key Value Driver
ROTCE (16.1%) vs. cost of equity (8.2%)
Implied Market Multiple
1.08x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (7 analysts)
$22.00
Divergence from AlphaVal
120%
Summary
With ROTCE of 16.1% vs. 8.2% cost of equity, fair P/TBV is 2.91x on $16.63 tangible book, implying $48.39 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $22.00 (from 7 analysts). Our estimate is 120% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly